Marathon Oil’s focus on US shale plays paying off

After a steady 2017, Marathon Oil is sprinting into 2018. The independent exploration and production company that is active in every major U.S. shale play, expects to grow production and remain cash flow neutral if oil stays in the $50/b range. But, if oil trades in the $60/b range, Marathon will generate free cash flow of up to $500 million. The talk of free cash flow and recent success with completion and production activity in the Eagle Ford and Bakken has the Marathon team excited for the new fiscal year.

2017 was a pivotal year for all of Marathon’s operations. The company exited the oil sands in Canada and entered the Delaware Basin of the U.S. This year, 90 percent of all investment will be placed in the U.S. Roughly 60 percent of its U.S.-budget will go towards the Bakken (26 percent or $590 million) and Eagle Ford (31 percent or $710 million). Nearly one-third of the $2.3 billion budget will be spent in the Delaware (17 percent or $380 million and Midcontinent (18 percent or $410 million) acreage.

If the company does realize free cash flow, Tillman said the main priority will be to look at creating long-term value for shareholders, which could be accomplished through further exploration in new or existing plays, adding bolt-on acreage or providing greater dividends to shareholders.

During the company’s fourth quarter review and 2018 outlook call, several investors praised the company for well results in the Eagle Ford and Bakken plays, something that wasn’t always the norm for the company.

“At a basin level, we couldn’t be more proud of our Eagle Ford team,” said Lee Tillman, president and CEO. “They delivered their best year of productivity in spite of Hurricane Harvey.”

In the Bakken, Marathon exited 2017 with a new outlook on well completions. According to Tillman, Marathon now has 15 of the top 25 Middle Bakken wells in history—seven of which came in Q4. New enhanced completion designs were implemented and will push production levels into strong growth mode this year even with oil at $50/b.

The executive team will also make changes to its compensation schedule. This year, a focus will be put on corporate cash return on invested capital and cash flow per net adjusted share, both of which are transparent and can be figured by publicly available data, Tillman said.